Making Your Money Last In Retirement
by Takara Alexis

Just like most people, you might put considerable time and effort into putting away money for retirement. You might have put less thought into just how to make it last and how slowly you would spend it.

There are certain steps you are able to take to make your money last. Of course you can work longer and spend less, but even then you do not know how long you will live. All you have are the odds: for a married couple at age 65, there's a 58% chance one person will live to 90; a 50% chance one will live to 92; and a 25% chance one will live to 97.

If you have a melancholy-era mentality, insert your nest egg in savings accounts and certificates of deposit with no more than the FDIC-insured limit of $250,000 in any of the banks. It will always be there for you regardless of how the markets are doing plus it's safe.

You probably don't happen to have $5 million lying around, so you'll have to take more of a risk to have any likelihood of generating that $100,000 a year you want. An alternative is to put cash in a mixed portfolio of bonds, stocks and real estate that gives dividends. If you start with $3 million and the market is performing as it usually does you should be fine. But if the market begins to lag or business' cut their dividends, your money could possibly not last.

Another reason to choose deferred annuities is that they allow you to continue saving tax-deferred after you've maxed out your 401(k) and your IRA. You'll still have to pay taxes as you take out the money. Unlike with an immediate annuity, if there is a remaining balance when you die, it goes to your heirs.

The negative aspect of deferred annuities is the lockups and often excessive fees. According to a study, you pay about 2.15%, and you could pay up to 4% in annual fees. Unless the tax deferral is truly significant, you may be better off investing in tax-efficient mutual funds or ETFs until you require the money, and then switching it into an immediate annuity. It isn't risk-free, but it could save you a lot of money in the long run.